What is financial porn?

Financial Porn_Master Your Finances_Sweat Your Assets

While you might have never heard the term “financial porn”, you have been definitely exposed to it.

US Supreme Court Justice Potter Stewart once said: “I don’t know how to define financial pornography, but I know it when I see it.” 

Origins of the term

Emmy award-winning finance journalist Jane Bryant Quinn is credited for coining the term.  She labelled most personal finance journalism as ‘financial pornography,’ appealing to the worst characteristics of investors. Back in August 1998, when she was asked about the term during an interview with abcnews.com titled “Good Investing isn’t Sexy”, Quinn stated:

I was getting at the newspapers and magazines that make investing sound easy. “Three ways to double your money.” “Ten hot stocks.” The articles that make it sound like the journalist knows the right stocks or mutual funds to buy. And the fact is we don’t know. Journalists don’t have any business pretending they’re investment analysts. We can talk about stocks, investment ideas and what people are saying. But journalists shouldn’t say that certain stocks will increase in value. Nobody knows.

The media world has changed dramatically in the last 20 years, but her opinion in Feb-2020 has not:

Now, financial porn is mostly on the internet. All these big firms coming up with 10 stocks [to buy now] and, let me tell you,  “7 stocks that are safe from the coronavirus”. Now I ask you: if this is not financial porn, what is? So, financial porn is still there. It has just moved from financial magazines to the newspapers to the internet.

With a bit of research, I found the other valuable comments and references:

Financial porn is a slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to an investor’s financial health. Short-term focus by the media on a financial topic can create excitement that does little to help investors make smart, long-term financial decisions, and in many cases clouds investor’s decision-making ability. (Bogleheads,Taylor Larrimore).

The industry has a term to describe the economic and political events that get people interested, even excited, but have virtually no real value: investment pornography. (Moneysense.ca).

Financial pornography is the normalization of exceptional financial circumstances in order to gain attention. Financial pornography takes the outliers of the personal finance/investing world and makes them seem ordinary for the purpose of attracting more eyeballs. (of dollar and data).

I call it financial pornography. It titillates and excites but gives no lasting pleasure. Succumb to it, and it could actually be hazardous to your financial health. I am talking about all those alluring cover headlines from financial magazines, all the “hot tips” from the supposedly market experts dispensing their eagerly sought but often contradictory advice all day long on cable TV. Not to mention the thinly disguised infomercial in which some financial planner buys air time from a radio or television station, then spends half the show asking listeners and viewers to call his office for an appointment. (Humberto Cruz).

America is, after all, notoriously tolerant of crackpots. But an examination of the rest of the popular financial media turns up little else of value, little intelligent life at all. In fact, most of what the popular financial media puts out could properly be called financial pornography! It’s not only bad for your wealth, it has no redeeming social value (Frank Armstrong).

Sadly, most investment information available on the Web falls into the category of “financial pornography“: the supposition that investing success is achieved by predicting the direction of the market and picking the right stocks. In turn, it is supposed that this can be accomplished by engaging the services of a select group of investment professionals (of which the interviewed/quoted analyst/newsletter writer is a member). (William J. Bernstein).

Let’s be clear. These sensational and emotionally driven sales pitches are not exclusive to the investment industry. For example,  Reddit founder attacked “Hustle Porn” as the Latest Toxic Scourge to Hit Entrepreneurs. Pied pipers are everywhere. Undoubtedly, there is a market that is attracted to such emotionally-driven storytelling. 

Classic financial porn titles

Indeed, It is pretty easy to read a wild variety of financial porn clickbait titles, hot-tips infomercials, and guru’s investment secret along these lines (Yahoo finance provides a wide variety):

– 5 hots stocks that will double in 6 months

– 10 stock you need to buy right now

– these new stocks offer income checks growing as fast as 11%

– Analyst sees these two stocks surging over 70%

– Bank of America Corp. strategies came out with a fresh list of what they call technology “moonshots” to help guide investors in their search for the next amazon

– 4 penny stocks insiders are buying

– I became a millionaire at 26. To make a lot of money, master these ten rules

– If I made it, you can make it too

– Sign-up for my newsletter with hot tips that will make you rich 

– 5 best Chinese stocks to buy and watch as Beijing crackdowns continue

Financial planner Brad Brain extensively wrote on the same subject:

business news channels are nothing more than financial pornography. I know that these types of programs have their loyal followings, but the simple truth is that a bunch of self-proclaimed gurus sitting around giving 30-second sound bites on which direction the market is going in the next five minutes is nothing more than a tawdry, often lurid, way of getting your attention. It’s not wisdom; it’s the professional wrestling of the business world. […] There is a word for these hyped-up, can’t-miss, you-need-to-know-this-now, act-today types of messages. They’re called infomercials. Infomercials and wise, meaningful information are not the same thing. It behoves a person to know the difference”. […]. In an article entitled “Confessions of a Former Mutual Funds Reporter” that appeared in the April 26, 1999 issue of Fortune Magazine, the anonymous author, who works for the very same Fortune magazine, writes, “Mutual funds reporters lead a secret investing life. By day we write “Six Funds to Buy NOW!” We seem to delight in dangerous sectors like technology. We appear fascinated with one-week returns. By night, however, we invest in sensible index funds.” […]. In personal-finance journalism it doesn’t matter if the advice turns out to be right, as long as it’s logical.
You’re supposed to produce the most stories “that end in investment decisions,” so publications substitute formulas for wisdom. The formula for recommending funds: Filter according to returns, then add something trendy.” […]. If you are a talking head on a business news network the name of the game isn’t being accurate. It’s all about getting your attention, and there really is no downside to being wrong. […].
From that perspective, all the better to pump out liberal doses of financial porn, since the objective is not to be accurate as much as it is to be entertaining. Be dramatic. Be flamboyant. Be wrong even. Just don’t be boring. The problem is that a sensational depiction of behaviour designed primarily to cause excitement can put the reader in a bad state of mind for making smart financial decisions.

How can you protect yourself from financial porn

In such an environment,  you and your advisor must protect your mind and your portfolio from Financial Pornography. The effects can be excessive trading, worrying about the markets, making irrational investment calls, and countless other costly mistakes. But, let’s be clear: once you have recognised and processed it, you might laugh about it!

To a certain degree, the investment industry and media are regulated. Consumer protection principles have been developed and promoted around the world. There are many excellent journalists, commentators and book authors. The best articles, pieces of advice, and commentaries are timeless, not dependent on circumstances. However, crooks and naive marketers are always out there, actively promoting products and services. As a result, the industry produces more salesmanship than stewardship. Last but not least, there is a growing number of Instagram, youtube, TikTok investment influences that promote their own success story (real, fake or embellished) and naively expect you to mirror them.

Overall, The safest approach for you is to:

1) Avoid as much as possible daily business and investment “news”. Don’t be over-exposed to information, or you will feel the need to take action, often any action, probably not aligned to your long term financial interests.

2) Build a strong firewall against “too good to be true news”. If you love the superlatives and get attracted to words like – the best, fastest, secret, exclusive, top, super, hot, safe, just for today, then you could be an easy victim.

3) Dissuade yourself from trying to make a quick buck or get rich overnight.

4) Educate yourself on these topics. It is strongly advisable to know about behavioural finance, personal finance and investing, and identify reliable voices and references before looking for any specific financial advice.

5) Don’t make financial decisions in a hurry. Good long-term financial decisions are not time-sensitive. So while the sooner you invest, the better it is, you still need to have a financial plan that guides you and some due diligence to identify and manage any “exceptional opportunity” that will lead to poor decisions.

Fortunately, anyone focusing on a time frame of twenty years or longer with a properly diversified investment portfolio isn’t going to care much about the day-to-day, week-to-week, or month-to-month gyrations of any hot news.

As the saying goes, “In the short run, returns are virtually unknowable, but in the long run, they are virtually inevitable.”

 

As usual, Sweat Your Assets!

 

Other related articles:

The best Investment Advice you will NEVER get

What the Investment Industry Does not want you to know

How to find the right financial advice

There are secrets, there are no gurus in personal finance

– Finding your purpose: Hunter Thompson’s letter to his friend Hume

 

References:

Unovest.co, Economic times India, Of Dollars and Data, MoneySense.ca, Bogleheads.org, Dnaindia, Equityplusbd.com, Pacifica Wealth.comRetire Happy.ca, BradBrain Financial (1), BradBrain Financial (2), Investorhome.com.